UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For The Quarterly Period Ended
September
30, 2012
or
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from _______________
to ________________
Commission File Number:
000-52593
SAKER AVIATION SERVICES, INC.
(Exact name of registrant as specified in
its charter)
Nevada
|
87-0617649
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification No.)
|
|
|
101 Hangar Road, Avoca, PA
|
18641
|
(Address of principal executive offices)
|
(Zip Code)
|
(570) 457-3400
(Registrant’s
telephone number, including area code)
N/A
(Former name,
former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes
x
No
o
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller Reporting Company
|
x
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
x
As of November 14, 2012, the registrant had 33,040,422 shares
of its common stock, $0.001 par value, issued and outstanding.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Form 10-Q
September 30, 2012
Index
PART I - FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011
|
1
|
|
|
|
|
|
|
Statements of Operations for the Three and Nine months ended September 30, 2012 and 2011 (unaudited)
|
2
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|
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|
|
|
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Statements of Cash Flows for the Nine months ended September 30, 2012 and 2011 (unaudited)
|
3
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|
|
|
|
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Notes to Financial Statements (unaudited)
|
4
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|
|
|
|
|
|
|
|
|
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
|
8
|
|
|
|
|
|
|
|
|
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
13
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|
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|
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|
|
|
|
|
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ITEM 4. CONTROLS AND PROCEDURES
|
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13
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PART II - OTHER INFORMATION
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|
|
|
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|
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ITEM 6. EXHIBITS
|
|
14
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|
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SIGNATURES
|
|
|
|
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|
15
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|
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|
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|
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
ASSETS
|
|
|
|
|
September 30,
2012
|
|
December 31,
2011
|
|
|
(unaudited)
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash
|
|
$
|
318,688
|
|
|
$
|
451,957
|
|
Accounts receivable
|
|
|
1,760,312
|
|
|
|
1,532,673
|
|
Inventories
|
|
|
244,930
|
|
|
|
285,171
|
|
Note receivable – current portion, less discount
|
|
|
106,509
|
|
|
|
101,077
|
|
Prepaid expenses and other current assets
|
|
|
468,773
|
|
|
|
373,385
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
204,000
|
|
Total current assets
|
|
|
2,899,212
|
|
|
|
2,948,263
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT
, net
|
|
|
|
|
|
|
|
|
of accumulated depreciation and amortization of $1,258,405 and $961,189 respectively
|
|
|
2,367,656
|
|
|
|
2,539,198
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
198,368
|
|
|
|
181,259
|
|
Note receivable, less current portion and discount
|
|
|
220,137
|
|
|
|
300,712
|
|
Intangible assets – trade names
|
|
|
135,000
|
|
|
|
135,000
|
|
Goodwill
|
|
|
2,368,284
|
|
|
|
2,368,284
|
|
Total other assets
|
|
|
2,921,789
|
|
|
|
2,985,255
|
|
TOTAL ASSETS
|
|
$
|
8,188,657
|
|
|
$
|
8,472,716
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
905,987
|
|
|
$
|
781,675
|
|
Customer deposits
|
|
|
132,247
|
|
|
|
138,756
|
|
Lines of credit
|
|
|
—
|
|
|
|
650,000
|
|
Accrued expenses
|
|
|
441,509
|
|
|
|
385,872
|
|
Deferred income taxes
|
|
|
169,150
|
|
|
|
—
|
|
Notes payable – current portion
|
|
|
532,269
|
|
|
|
488,846
|
|
Total current liabilities
|
|
|
2,181,162
|
|
|
|
2,445,149
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Notes payable - less current portion
|
|
|
1,252,826
|
|
|
|
1,809,902
|
|
Total liabilities
|
|
|
3,433,988
|
|
|
|
4,255,051
|
|
|
|
|
|
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STOCKHOLDERS’ EQUITY
|
|
|
|
|
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Preferred stock - $.001 par value; authorized 9,999,154;
|
|
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|
|
|
|
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none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock - $.001 par value; authorized 100,000,000;
|
|
|
|
|
|
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|
33,040,422 shares issued and outstanding as of
September 30, 2012 and December 31, 2011
|
|
|
33,040
|
|
|
|
33,040
|
|
Additional paid-in capital
|
|
|
19,877,366
|
|
|
|
19,850,134
|
|
Accumulated deficit
|
|
|
(15,155,737
|
)
|
|
|
(15,665,509
|
)
|
TOTAL STOCKHOLDERS’ EQUITY
|
|
|
4,754,669
|
|
|
|
4,217,665
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
8,188,657
|
|
|
$
|
8,472,716
|
|
See notes
to condensed consolidated financial statements.
1
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
For the Three Months Ended
September 30,
|
|
For the Nine months ended
September 30,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
4,882,781
|
|
|
$
|
4,643,683
|
|
|
$
|
12,893,110
|
|
|
$
|
11,993,660
|
|
COST OF REVENUE
|
|
|
2,868,775
|
|
|
|
2,905,280
|
|
|
|
7,585,957
|
|
|
|
7,067,977
|
|
GROSS PROFIT
|
|
|
2,014,006
|
|
|
|
1,738,403
|
|
|
|
5,307,153
|
|
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|
4,925,683
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|
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|
|
|
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SELLING, GENERAL AND ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
EXPENSES
|
|
|
1,557,300
|
|
|
|
1,327,867
|
|
|
|
4,219,712
|
|
|
|
3,963,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
456,706
|
|
|
|
410,536
|
|
|
|
1,087,441
|
|
|
|
962,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE), net
|
|
|
3,864
|
|
|
|
4,607
|
|
|
|
39,607
|
|
|
|
20,780
|
|
INTEREST INCOME
|
|
|
6,014
|
|
|
|
5,642
|
|
|
|
19,358
|
|
|
|
24,454
|
|
INTEREST EXPENSE
|
|
|
(42,585
|
)
|
|
|
(39,914
|
)
|
|
|
(116,634
|
)
|
|
|
(118,108
|
)
|
TOTAL OTHER INCOME (EXPENSE)
|
|
|
(32,707
|
)
|
|
|
(29,665
|
)
|
|
|
(57,669
|
)
|
|
|
(72,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAX EXPENSE
|
|
|
423,999
|
|
|
|
380,871
|
|
|
|
1,029,772
|
|
|
|
889,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
(71,000
|
)
|
|
|
(150,000
|
)
|
|
|
(147,000
|
)
|
|
|
(243,000
|
)
|
DEFERRED
|
|
|
(157,000
|
)
|
|
|
(86,000
|
)
|
|
|
(373,000
|
)
|
|
|
(262,000
|
)
|
INCOME TAX EXPENSE
|
|
|
(228,000
|
)
|
|
|
(236,000
|
)
|
|
|
(520,000
|
)
|
|
|
(505,000
|
)
|
NET INCOME
|
|
|
195,999
|
|
|
|
144,871
|
|
|
|
509,772
|
|
|
|
384,713
|
|
Net income per Common Share – Basic and Diluted
|
|
$
|
0.01
|
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
Weighted Average Number of Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding – Basic
|
|
|
33,040,422
|
|
|
|
33,040,422
|
|
|
|
33,040,422
|
|
|
|
33,045,420
|
|
Weighted Average Number of Common Shares
Outstanding – Diluted
|
|
|
34,278,110
|
|
|
|
34,844,369
|
|
|
|
34,278,110
|
|
|
|
34,849,367
|
|
See notes to condensed consolidated
financial statements.
2
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
Nine months ended
September 30,
|
|
|
2012
|
|
2011
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
509,772
|
|
|
$
|
384,713
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
297,216
|
|
|
|
259,551
|
|
Management fee recorded through additional paid in capital
|
|
|
—
|
|
|
|
745,669
|
|
Loss on dispositions of equipment
|
|
|
—
|
|
|
|
2,799
|
|
Stock based compensation
|
|
|
27,232
|
|
|
|
5,247
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(227,639
|
)
|
|
|
(376,158
|
)
|
Inventories
|
|
|
40,241
|
|
|
|
(6,939
|
)
|
Prepaid expenses and other current assets
|
|
|
(95,388
|
)
|
|
|
41,828
|
|
Deposits
|
|
|
(17,109
|
)
|
|
|
275,105
|
|
Deferred income taxes
|
|
|
373,150
|
|
|
|
250,631
|
|
Accounts payable
|
|
|
124,312
|
|
|
|
407,205
|
|
Customer deposits
|
|
|
(6,509
|
)
|
|
|
(53,696
|
)
|
Accrued expenses
|
|
|
55,637
|
|
|
|
(1,255,691
|
)
|
TOTAL ADJUSTMENTS
|
|
|
571,143
|
|
|
|
295,551
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
1,080,915
|
|
|
|
680,264
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from disposition of equipment
|
|
|
—
|
|
|
|
65,247
|
|
Payment of note receivable
|
|
|
75,143
|
|
|
|
70,077
|
|
Purchase of property and equipment
|
|
|
(125,674
|
)
|
|
|
(917,885
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(50,531
|
)
|
|
|
(782,561
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Repayment of notes payable
|
|
|
(513,653
|
)
|
|
|
(809,305
|
)
|
Purchase of common stock, retired
|
|
|
—
|
|
|
|
(11,989
|
)
|
Line of credit, net
|
|
|
—
|
|
|
|
150,000
|
|
Repayment of line of credit
|
|
|
(650,000
|
)
|
|
|
—
|
|
Redemption of non-controlling interest
|
|
|
—
|
|
|
|
(476,995
|
)
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
(1,163,653
|
)
|
|
|
(1,148,289
|
)
|
NET CHANGE IN CASH
|
|
|
(133,269
|
)
|
|
|
(1,250,586
|
)
|
CASH
– Beginning
|
|
|
451,957
|
|
|
|
1,541,992
|
|
CASH
– Ending
|
|
$
|
318,688
|
|
|
$
|
291,406
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid during the periods for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
116,634
|
|
|
$
|
118,108
|
|
Income Taxes
|
|
$
|
146,796
|
|
|
$
|
253,608
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Increase in notes payable for the redemption of non-controlling interest
|
|
$
|
—
|
|
|
$
|
1,956,952
|
|
See notes to condensed consolidated
financial statements.
3
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 1 -
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim
financial statements and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and disclosures
required for annual financial statements. These condensed consolidated financial statements should be read in conjunction with
the financial statements and related footnotes for Saker Aviation Services, Inc. and its subsidiaries (collectively, the “Company”),
which appear in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities
and Exchange Commission.
The condensed consolidated balance sheet as of September 30,
2012 and the condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2012 and 2011
have been prepared by the Company without audit. In the opinion of the Company’s management, all adjustments (consisting
of normal recurring accruals) necessary to make the Company’s financial position as of September 30, 2012 and its results
of operations and cash flows for the three and nine months ended September 30, 2012 not misleading have been included. The results
of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected
for any full year or any other interim period.
The Company has evaluated subsequent events which have occurred
after September 30, 2012.
NOTE 2 –
Management’s Liquidity Plans
As of September 30, 2012, the Company had cash of $318,688 and
had a working capital surplus of $718,050. The Company generated revenue of $12,893,110 and net income of $509,772 for the nine
months ended September 30, 2012.
Effective January 30, 2012, the Company entered into an amended
and restated Loan Agreement (the “Amended and Restated Loan Agreement”) with Bank of America. The Amended and Restated
Loan Agreement increased the Company’s revolving credit facility (“B of A Credit Facility”) to $1,150,000. No
amounts were outstanding under the B of A Credit Facility as of September 30, 2012.
The B of A Credit Facility requires interest payments based
on outstanding balances at an interest rate calculated using the 30-day LIBOR rate plus 300 basis points, and is annually renewable
at Bank of America’s option. An annual fee of 0.50% of the total availability of the B of A Credit Facility is also incurred.
On September 21, 2011, the Company entered into an agreement
with Bank of America whereby the bank established an equipment line of credit for up to $130,000. On May 1, 2012, the principal
amount drawn by the company against this line of credit of $118,703 was converted into a term loan (the “B of A Equipment
Loan”). The B of A Equipment Loan is being amortized over five years and bears interest at a rate equal to the bank’s
prime rate plus 1.5 %.
On July 20, 2011, the Company entered into a loan agreement
with Bank of America that provided the Company with a $318,198 term loan facility (the “B of A Term Loan”). The B of
A Term Loan is being amortized over 48 months, bears interest at a rate of 4.2% and matures on July 20, 2015. A one-time origination
fee of 1.0% was incurred at the commencement of the B of A Term Loan.
The Company is party to a concession agreement with the City
of New York for the operation of the Downtown Manhattan Heliport (the “Heliport”), which expires on October 31, 2018.
Under this agreement, the Company must pay the greater of 18% of the first $5 million in program year gross receipts and 25% of
gross receipts in excess of $5 million or minimum annual guaranteed payments that began at $1.2 million in Year 1 of the agreement,
which commenced on November 1, 2008, and increase to approximately $1.7 million in Year 10 of the agreement. During the nine months
ended September 30, 2012, the Company incurred approximately $1,560,000 in concession fees with the City of New York, which are
recorded as cost of revenue.
NOTE 3 -
Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”),
FBO Air Wilkes-Barre, Inc. d/b/a Saker Aviation Services (“FBOWB”), and FBO Air Garden City, Inc. d/b/a Saker Aviation
Services (“FBOGC”). All significant inter-company accounts and transactions have been eliminated in consolidation.
4
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Reclassifications
Certain reclassifications were made to the prior period amounts
to conform to the current period presentation. None of the reclassifications affected our net income or loss in any period.
Net Income Per Common Share
Net income for the three and nine months ended September 30,
2012 was $195,999 and $509,772, respectively, and net income for the three and nine months ended September 30, 2011 was $144,871
and $384,713, respectively. Basic net income per share applicable to common stockholders is computed based on the weighted average
number of shares of the Company’s common stock outstanding during the periods presented. Diluted net income per share reflects
the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into
common stock. Potentially dilutive securities, consisting of options and warrants, are excluded from the calculation of the diluted
income per share when their exercise prices are greater than the average market price of the common stock during the period.
The following table sets forth the components used in the computation
of basic net income per share:
|
|
For the Three Months Ended
September 30,
|
|
For the Nine months ended
September 30,
|
|
|
2012*
|
|
2011*
|
|
2012*
|
|
2011*
|
Weighted average common shares outstanding, basic
|
|
|
33,040,422
|
|
|
|
33,040,422
|
|
|
|
33,040,422
|
|
|
|
33,045,420
|
|
Common shares upon exercise of options
|
|
|
1,237,688
|
|
|
|
1,803,947
|
|
|
|
1,237,688
|
|
|
|
1,803,947
|
|
Weighted average common shares outstanding, diluted
|
|
|
34,278,110
|
|
|
|
34,844,369
|
|
|
|
34,278,110
|
|
|
|
34,849,367
|
|
* Outstanding stock options and warrants aggregating 1,050,000
and 900,000 for the three and nine months ended September 30, 2012 and 2011, respectively, were excluded from the computation
of diluted earnings per share as their exercise prices were greater than the average market price of the common stock for the
three and nine months ended September 30, 2012 and 2011, respectively.
Stock Based Compensation
Stock-based compensation expense for all share-based payment
awards are based on the grant-date fair value. The Company recognizes these compensation costs over the requisite service period
of the award, which is generally the option vesting term. For
the nine months ended September 30, 2012 and 2011, the Company
incurred stock-based compensation of $27,232 and $5,247, respectively. Such amounts have been recorded as part of the Company’s
selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. As of September
30, 2012, the unamortized fair value of such options totaled $4,500.
Option valuation models require the input of highly subjective
assumptions, including the expected life of the option. Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value
of its employee stock options.
Recently Issued Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update No. 2011-08,
Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill
for Impairment
(ASU 2011-08), to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08
permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value
of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently
prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. ASU 2011-08 is
effective for the Company in the year ending December 31 2013 and earlier adoption is permitted. The Company has adopted ASU 2011-08
on its consolidated financial statements.
5
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 4 -
Inventories
Inventories consist primarily of maintenance parts and aviation
fuel, which the Company sells to its customers. The Company also maintains fuel inventories for commercial airline use and charges
into-plane fees when servicing commercial aircraft. A summary of inventories as of September 30, 2012 and December 31, 2011 is
set forth in the following table:
|
|
September 30, 2012
|
|
December 31, 2011
|
Parts inventory
|
|
$
|
99,377
|
|
|
$
|
105,162
|
|
Fuel inventory
|
|
|
134,313
|
|
|
|
167,540
|
|
Other inventory
|
|
|
11,239
|
|
|
|
12,469
|
|
Total inventory
|
|
$
|
244,930
|
|
|
$
|
285,171
|
|
Included in inventories are amounts held for third parties of
$116,728 and $173,023 as of September 30, 2012 and December 31, 2011, respectively, with an offsetting liability included as part
of accrued expenses.
NOTE 5 -
Stockholders’ Equity
Stock Options
Details of all options outstanding are presented in the table
below:
|
|
Number of
Options
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
Balance, January 1, 2012
|
|
|
1,675,000
|
|
|
$
|
0.14
|
|
Granted
|
|
|
100,000
|
|
|
|
0.05
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
(350,000
|
)
|
|
|
0.38
|
|
Balance, September 30, 2012
|
|
|
1,425,000
|
|
|
$
|
0.08
|
|
Exercisable at September 30, 2012
|
|
|
425,000
|
|
|
$
|
0.08
|
|
On June 1, 2012, the Company granted an employee a stock option
under the Plan to purchase 100,000 shares of common stock at $0.05 per share, the closing price of the Company’s common stock
on May 31, 2012. Fifty-thousand shares subject to such option vest on December 31, 2012 and the remaining 50,000 shares vest on
December 31, 2013. This option is valued at $5,000 and is being amortized over the vesting period.
On April 17, 2012, four sets of options of 25,000 shares each,
representing a total of 100,000 shares, expired.
On April 1, 2012, an option for 250,000 shares expired.
NOTE 6 –
Related Parties
The law firm of Wachtel & Masyr, LLP provides certain legal
services to the Company. William B. Wachtel, the Company’s Chairman of the Board of Directors, is a managing partner of this
firm. During the nine months ended September 30, 2012 and 2011, the Company was billed approximately $0 for legal services. At
September 30, 2012 and December 31, 2011, the Company has recorded in accounts payable an obligation for legal fees to such firm
of approximately $250 related to legal services provided by such firm.
6
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
On August 29, 2011, the Company entered into a Redemption Agreement
with the non-controlling interest in a subsidiary of the Company. As part of this agreement, the non-controlling interest relinquished
its membership interest in the subsidiary in return for earn-out payments of the non-controlling interest’s capital account
of $2,769,000. Of that amount, $444,000 was paid upon the execution of the Redemption Agreement, an additional approximately $808,000
has been paid through September 30, 2012. The balance is recorded as a liability at a discount rate of 7%. Continuing earn-out
payments shall continue to be made on a monthly basis in an amount equal to (i) 5% of the subsidiary’s gross receipts, plus
(ii) 5% of the subsidiary’s pre-tax profit.
NOTE 7 -
Litigation
From time to time in the normal course of its business, the
Company may be a party to one or more claims or disputes which may result in litigation. The Company's management does not, however,
presently expect that any such matters, either individually or in the aggregate, will have a material adverse effect on the Company's
business, financial condition or results of operations.
7
Item 2 - Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion
should be read together with the condensed consolidated financial statements and related notes appearing in Item 1 of this report.
This Item 2 contains forward-looking statements that involve risks and uncertainties. Undue reliance should not be placed on these
forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those included
in such forward-looking statements. Factors which could cause actual results to differ materially include those set forth at the
end of this Item 2 under the heading "Cautionary Statement Regarding Forward Looking Statements," those discussed elsewhere
in this report and those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2011.
OVERVIEW
Saker Aviation
Services, Inc. (“we”, “us”, “our”) is a Nevada corporation, the common stock, $0.001 par
value per share (the “common stock”), of which is publicly traded on the OTCQB Marketplace under the symbol
“SKAS”. Through our subsidiaries, we operate in the fixed base operation (“FBO”) segment of the
general aviation industry. We serve as the operator of a heliport FBO, two primarily fixed-wing aircraft FBOs and provide
consulting services for an FBO facility that we do not own. FBOs provide ground-based services, such as fueling and aircraft
storage for general aviation, commercial and military aircraft; aircraft maintenance; as well as other miscellaneous
services.
We were formed on January
17, 2003 (our date of inception) as a proprietorship and were incorporated in Arizona on January 2, 2004. We became a public company
as a result of a reverse merger transaction on August 20, 2004 with Shadows Bend Development, Inc., an inactive public Nevada corporation
and subsequently changed our name to FBO Air, Inc. On December 12, 2006, we changed our name to FirstFlight, Inc. On September
2, 2009, we changed our name to Saker Aviation Services, Inc.
Our business activities
are carried out as an FBO at the Wilkes-Barre/Scranton (Pennsylvania) International Airport, as an FBO at the Garden City (Kansas)
Regional Airport, as the FBO and operator of the Downtown Manhattan (New York) Heliport, and as a consultant to the FBO and operator
of the Niagara Falls (New York) International Airport.
The Wilkes-Barre facility
became part of our company as a result of our acquisition of Tech Aviation Service, Inc. (“Tech”) in March 2005. The
Garden City facility became part of our company as a result of our acquisition of the FBO assets of Central Plains Aviation, Inc.
(“CPA”) in March 2005.
The New York heliport
facility became part of our company through the award of a concession agreement by the City of New York to operate the Downtown
Manhattan Heliport, which was assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”).
The FBO segment of
the general aviation industry is highly fragmented. According to the National Air Transportation Association (“NATA”),
the industry is populated by over 3,000 operators that serve customers at one or more of over 3,000 airport facilities across the
country that have at least one paved 3,000-foot runway. The vast majority of these companies are single location operators. NATA
characterizes companies with operations at three or more airports as “chains.” An operation with FBOs in at least two
distinctive regions of the country is considered a “national” chain while multiple locations within a single region
are considered “regional” chains.
REVENUE AND OPERATING RESULTS
Comparison of the Three and Nine months
ended September 30, 2012 and September 30, 2011.
8
REVENUE
Revenue increased by
5.1 percent to $4,882,781 for the three months ended September 30, 2012 as compared with corresponding prior-year period revenue
of $4,643,683. For the nine months ended September 30, 2012, revenue increased by 7.5 percent to $12,893,110 as compared with revenue
of $11,993,660 in the same period in the prior year.
For the three months
ended September 30, 2012, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 3.0 percent
to approximately $2,600,000 as compared to approximately $2,500,000 in the three months ended September 30, 2011. The increase
was related to a combination of higher volume of gallons along with higher average fuel prices as compared with the prior year.
We generally price our fuel products on a fixed dollar margin basis. As the cost of fuel increases, the corresponding customer
price increases as well. If volume is constant, this methodology yields higher revenue but at comparable gross margins.
For the three months
ended September 30, 2012, revenue associated with services and supply items increased by 7.6 percent to approximately $2,200,000
as compared to approximately $2,100,000 in the three months ended September 30, 2011. The increase was driven by higher levels
of activity and related revenue in Heliport operations, which offset a decrease in maintenance activity and related revenue in
the three months ended September 30, 2012 as compared to the same period in the prior year.
For the three months
ended September 30, 2012, all other revenue increased by 11.4 percent to approximately $68,000 as compared to approximately $61,000
in the three months ended September 30, 2011.
For the nine months
ended September 30, 2012, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 12.3 percent
to approximately $7,000,000 as compared to approximately $6,200,000 in the nine months ended September 30, 2011. The increase was
related to a combination of a higher volume of gallons along with higher average fuel prices as compared with the prior year.
For the nine months
ended September 30, 2012, revenue associated with services and supply items increased by 2.0 percent to approximately $5,800,000
as compared to approximately $5,700,000 in the nine months ended September 30, 2011.
For the nine months
ended September 30, 2012, all other revenue increased by 19.7 percent to approximately $164,000 as compared to approximately $137,000
in the nine months ended September 30, 2011.
GROSS PROFIT
Total gross profit
increased 15.9 percent to $2,014,006 in the three months ended September 30, 2012 as compared with the three months ended September
30, 2011. Gross profit as a percent of revenue increased to 41.2 percent in the three months ended September 30, 2012 as compared
to 37.4 percent in the same period in the prior year. The increase in gross margin is related to a higher mix of service and supply
gross profit, which generally carries a higher margin as compared to fuel and related gross profit.
Total gross profit
increased 7.7 percent to $5,307,153 in the nine months ended September 30, 2012 as compared with the nine months ended September
30, 2011. Gross profit as a percent of revenue was essentially flat at 41.2 percent in the nine months ended September 30, 2012
as compared to 41.1 percent in the same period in the prior year.
OPERATING EXPENSE
Selling, General and Administrative
Total selling, general
and administrative (“SG&A”) expenses were $1,557,300 in the three months ended September 30, 2012, an increase
of approximately $229,000 or 17.3 percent, as compared to the same period in 2011. Personnel expense drove the increase as additional
headcount were added to handle the additional volume and activity.
9
SG&A associated
with our FBO operations was approximately $1,500,000 in the three months ended September 30, 2012, an increase of approximately
$214,000, or 16.7 percent, as compared to the three months ended September 30, 2011. SG&A associated with our FBO operations
as a percentage of revenue was 30.6 percent for the three months ended September 30, 2012, as compared with 27.5 percent in the
corresponding prior year period.
Corporate SG&A
was approximately $65,000 for the three months ended September 30, 2012, representing an increase of approximately $16,000 as compared
with the corresponding prior year period.
Total SG&A was
$4,219,711 in the nine months ended September 30, 2012, an increase of approximately $256,000 or 6.5 percent, as compared to the
same period in 2011. Personnel expense drove the increase as additional headcount were added to handle the additional volume and
activity.
SG&A associated
with our FBO operations were approximately $4,000,000 in the nine months ended September 30, 2012, an increase of approximately
$241,000, or 6.4 percent, as compared to the nine months ended September 30, 2011. SG&A associated with our FBO operations
as a percentage of revenue was 31.2 percent for the six and nine months ended September 30, 2012, as compared with 31.5 percent
in the corresponding prior year period.
Corporate SG&A
was approximately $196,000 for the nine months ended September 30, 2012, an increase of approximately $16,000, or 8.8 percent,
as compared to the corresponding prior year period.
OPERATING INCOME
Operating income for
the three and nine months ended September 30, 2012 was $456,706 and $1,087,441, respectively, as compared to $410,536 and $962,587
in the three and nine months ended September 30, 2011, respectively. Improvements on a year-over-year basis were driven by a combination
of higher levels of revenue leading to increased gross profit, which offset higher SG&A, as described above.
Depreciation and Amortization
Depreciation and amortization
was approximately $298,000 and $260,000 for the nine months ended September 30, 2012 and 2011, respectively. The increase was largely
attributed to the depreciation recorded in connection with the capital improvement program at the Heliport, as described in our
Annual Report on Form 10-K for the year ended December 31, 2011.
Interest Income/Expense
Interest income for
the three and nine months ended September 30, 2012 was $6,014 and $19,358, respectively, as compared to $5,642 and $24,454 in three
and nine months ended September 30, 2011, respectively. Interest expense for the three and nine months ended September 30, 2012
was $42,585 and $116,634, respectively, as compared to $39,914 and $118,108 in the same periods in 2011.
Income Tax
Income tax expense
for the three and nine months ended September 30, 2012 was $228,000 and $520,000, respectively, as compared to $236,000 and $505,000,
respectively, for the three and nine months ended September 30, 2011.
Net Income Per Share
Net income for the
three and nine months ended September 30, 2012 was $195,999 and $509,772, respectively. Net income for the three and nine months
ended September 30, 2011 was $144,871 and $384,713, respectively.
Basic and diluted net
income per share for the three and nine months ended September 30, 2012 was $0.01 and $0.02, respectively. Basic and diluted net
income per share for the three and nine months ended September 30, 2011 was $0.00 and $0.01, respectively.
10
LIQUIDITY AND CAPITAL RESOURCES
As of September 30,
2012, we had cash of $318,688 and had a working capital surplus of $718,050. We generated revenue of $12,893,110 and net income
of $509,772 for the nine months ended September 30, 2012.
Effective January 30,
2012, we entered into an amended and restated Loan Agreement (the “Amended and Restated Loan Agreement”) with Bank
of America. The Amended and Restated Loan Agreement increased our revolving credit facility (“B of A Credit Facility”)
to $1,150,000. No amounts were outstanding under the B of A Credit Facility as of September 30, 2012.
The B of A Credit Facility
requires interest payments based on outstanding balances at an interest rate calculated using the 30-day LIBOR rate plus 300 basis
points, and is annually renewable at Bank of America’s option. An annual fee of 0.50% of the total availability of the B
of A Credit Facility is also incurred.
On September 21, 2011,
we entered into an agreement with Bank of America whereby the bank established an equipment line of credit for up to $130,000.
On May 1, 2012, the principal amount drawn by the company against this line of credit of $118,703 was converted into a term loan
(the “B of A Equipment Loan”). The B of A Equipment Loan is being amortized over five years and bears interest at a
rate equal to the bank’s prime rate plus 1.5 %.
On July 20, 2011, we
entered into a loan agreement with Bank of America that provided us with a $318,198 term loan facility (the “B of A Term
Loan”). The B of A Term Loan is being amortized over 48 months, bears interest at a rate of 4.2% and matures on July 20,
2015. A one-time origination fee of 1.0% was incurred at the commencement of the B of A Term Loan.
We are party to a concession
agreement with the City of New York for the operation of the Downtown Manhattan Heliport (the “Heliport”), which expires
on October 31, 2018. Under this agreement, we must pay the greater of 18% of the first $5 million in program year gross receipts
and 25% of gross receipts in excess of $5 million or minimum annual guaranteed payments that began at $1.2 million in Year 1 of
the agreement, which commenced on November 1, 2008, and increase to approximately $1.7 million in Year 10 of the agreement. During
the nine months ended September 30, 2012, we incurred with the City of New York approximately $1,560,000 in concession fees, which
are recorded in the cost of revenue.
During the nine months
ended September 30, 2012, we had a net decrease in cash of $133,269. Our sources and uses of funds during this period were as follows:
Cash from Operating Activities
For the nine months
ended September 30, 2012, net cash provided by operating activities was $1,080,915. This amount included an increase in operating
cash related to net income of $509,772 and additions for the following items: (i) depreciation and amortization, $297,216; (ii)
stock-based compensation expense, $27,232; (iii) inventories, $40,241; (iv) deferred income taxes, $373,150; (iv) accounts payable,
$124,312; and (vii) accrued expenses, $55,637. The increase in cash provided by operating activities in 2012 was offset by the
following items: (i) accounts receivable, $227,639; (ii) prepaid expenses, $95,388; (iii) deposits, $17,109; (iv) and customer
deposits, $6,509. For the nine months ended September 30, 2011, net cash provided by operating activities was $680,264. This amount
included an increase in operating cash related to net income of $384,713 and additions for the following items: (i) depreciation
and amortization, $259,551; (ii) management fees recorded through additional paid in capital, $745,669; (iii) stock-based compensation
expense, $5,247; (iv) accounts payable, $407,205; (v) deposits, $275,105; (vi) deferred income taxes, $250,631; (vii) prepaid expenses,
$41,828; and (viii) loss on disposition of equipment, $2,799. The increase in cash used in operating activities in 2011 was offset
by the following items: (i) accounts receivable, $376,158; (ii) inventories, $6,939; (iii) customer deposits, $53,696; and (v)
accrued expenses, $1,255,691.
11
Cash from Investing Activities
For the nine months
ended September 30, 2012, net cash used in investing activities was $50,531 and was attributable to the purchase of property and
equipment of $125,674 offset by the repayment of notes receivable of $75,143. For the nine months ended September 30, 2011, net
cash used in investing activities was $782,561 and was attributable to the purchase of property and equipment, $917,885 offset
by the payment of notes receivable of $70,077; and (iv) proceeds from the disposition of equipment of $65,247.
Cash from Financing Activities
For the nine months
ended September 30, 2012, net cash used in financing activities was $1,163,653, consisting of the repayment of notes payable, $513,653,
and the repayment of line of credit, $650,000. For the nine months ended September 30, 2011, net cash used in financing activities
was $1,148,289, consisting of (i) the redemption of non-controlling interest, $476,995; (ii) the repayment of notes payable, $809,305;
and (iii) purchase of common stock, retired, $11,989; offset by (iv) line of credit, net, $150,000.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Recent Accounting Pronouncements
In September 2011,
the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-08,
Intangibles – Goodwill
and Other (Topic 350) – Testing Goodwill for Impairment
(ASU 2011-08), to allow entities to use a qualitative approach
to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it
is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is
the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill
impairment test is not required. ASU 2011-08 is effective for us in the year ended December 31, 2013 and earlier adoption is permitted.
We have adopted ASU 2011-08 on our consolidated financial statements.
12
CAUTIONARY STATEMENT FOR FORWARD-LOOKING
STATEMENTS
Statements contained
in this report may contain information that includes or is based upon "forward-looking statements" relating to our business.
These forward-looking statements represent management's current judgment and assumptions, and can be identified by the fact that
they do not relate strictly to historical or current facts. Forward-looking statements are frequently accompanied by the use of
such words as "anticipates," "plans," "believes," "expects," "projects," "intends,"
and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including,
but not limited to, those relating to:
|
§
|
our ability to secure the additional debt
or equity financing, if required, to execute our business plan;
|
|
§
|
our ability to identify, negotiate and complete
the acquisition of targeted operators, consistent with our business plan;
|
|
§
|
existing or new competitors consolidating
operators ahead of us;
|
|
§
|
our ability to attract new personnel or
retain existing personnel, which would adversely affect implementation of our overall business strategy.
|
Any one of these or
other risks, uncertainties, other factors, or any inaccurate assumptions made by the Company may cause actual results to be materially
different from those described herein or elsewhere by us. Undue reliance should not be replaced on any such forward-looking statements,
which speak only as of the date they were made. Certain of these risks, uncertainties, and other factors are described in greater
detail in our Annual Report on Form 10-K for the year ended December 31, 2011 and in other filings we make with the Securities
and Exchange Commission. Subsequent written and oral forward-looking statements attributable to us or to persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements set forth above and elsewhere in our reports filed
with the Securities and Exchange Commission. We expressly disclaim any intent or obligation to update any forward-looking statements.
Item 3 – Quantitative and Qualitative Disclosures about
Market Risk
Not
applicable.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and
Procedures
Management, including
our President, Chief Executive Officer and principal financial officer (the same executive is both our principal executive officer
and principal financial officer), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon, and as of the date of that evaluation,
our President, Chief Executive Officer and principal financial officer concluded that the disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be disclosed in the reports filed and submitted by
us under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported as and when
required, and (ii) is accumulated and communicated to our management, including our President, Chief Executive Officer and
principal financial officer, as appropriate.
Changes in Internal Control Over Financial
Reporting
There has been no change
in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form
10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
13
PART II – OTHER INFORMATION
Item 6. Exhibits
Exhibit Nto.
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Description of Exhibit
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31.1
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Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer (principal executive and principal financial officer). *
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32.1
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Section 1350 Certification. *
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* Filed herewith
** 101.INS
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XBRL Instance Document
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**101.SCH
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XBRL Taxonomy Extension Schema Document
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**101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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**101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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**101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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**101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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** Pursuant to Rule 406T of Regulation
S-T, the information in this exhibit shall not be deemed to be “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any
registration statement, prospectus or other document filed under the Securities Act of 1933, or the Securities Exchange Act of
1934, except as shall be expressly set forth by specific reference in such filings.
14
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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Saker Aviation Services, Inc.
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Date:
November 14, 2012
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By:
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/s/ Ronald J. Ricciardi
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Ronald J. Ricciardi
President and Chief Executive Officer
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Grafico Azioni Saker Aviation Services (QB) (USOTC:SKAS)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Saker Aviation Services (QB) (USOTC:SKAS)
Storico
Da Giu 2023 a Giu 2024